Tuesday, January 08, 2008

NIA seeks joint ventures

NIA seeks joint ventures

To encourage the expansion of business innovation, the National Innovation Agency (NIA) has partnered with local and international venture capitalists to set up a fund for joint ventures in Thai companies which have product innovation and potential to grow.

Published on November 13, 2007

The fund is a result of cooperation among NIA, local venture-capital firm Vnet Capital, venture capitalist Japan Asia Investment (JAIC) and SME Bank. The fund has a budget of Bt210 million.

NIA's director Supachai Lorlowhakarn said the move was part of NIA's plans to move into the investment arena by providing funding support through a venture-capital model to help local companies expand.

"For four years we have been laying down basic infrastructure for innovation development by encouraging local companies to do product innovation and increase business. Now it's time to help them expand through new investment," Supachai said.

NIA's board recently approved a Bt50-million budget for the fund. JAIC, as the largest stakeholder in the fund, will contribute Bt100 million while SME Bank and Vnet Capital will provide Bt50 million and Bt10 million to the fund respectively.

As a local venture-capital firm, Vnet Capital will look after the fund management as the fund manager.

Set up under a new company called Thai Food and Innovation VCF, Supachai said the fund would run for 10 years and it hoped to make joint ventures in 16 Thai companies. The fund will focus on the food industry and will invest in at least two companies a year. The fund will invest between Bt20 million and Bt42 million in each project and in the first four years it has to make investments worth 60 per cent of the total fund value.

Potential projects for joint investment include coconut virgin oil, silk powder, O-rice, gara rice, original asparagus products and production of abalone. "We decided that around 60 per cent of investments will be in the food industry while the remaining investments can be in other strategic industries," Supachai said.

He added that the establishment of the fund was hoped to help local companies who had product innovation to expand and encourage them to move towards enterprise innovation, the next level of innovation development.

In the meantime, having a venture-capitalist partner from Japan will also assist local companies to get access to overseas markets, especially Japan, and this is a start for expansion to other countries.

Supachai said that as the fund was venture capitalist, it also aimed to bring business success to every project. The fund targets that each company it invests in will be listed on the Market for Alternative Investment within five years.

Making investments is another way NIA can encourage local companies to not only continue working on new innovation but also keep business and entrepreneurship in mind while opening for new investment from outside.

"It's necessary to put more focus on business and investment aspects so each innovative project attracts investors and this will move innovation development from product level to enterprise level," he said.

During the past three years, NIA has provided Bt241 million to support 218 innovation projects and this created around Bt6.1 billion of investment in the country.

An evaluation done by the Centre for Applied Economics Research at Chulalongkorn University found that each project supported by NIA could offer a higher internal rate of return.

By calculating the internal rate of return over 10 years, the report estimated that NIA projects could give an return of between 17 and 290 per cent while they also had net social benefit of 19 to 317 per cent.